Most of us would love to have more money in the accounts we have designated to provide our retirement spending, whether those are traditional retirement accounts, like 401(k)s and Roth IRAs, or just a simple non-qualified, taxable brokerage account (or even in investments that don't traditionally sit in a brokerage account). However, way too many people don't understand the best way to have more money in those accounts. So, I'm going to tell you.
Ready?
Here it is:
“The best way to have more money in your retirement accounts is to put more money in your retirement accounts, especially early in your career.”
Got it? What? Did that seem too obvious? I'm sorry, but it's the honest truth. For the life of me, I don't see why so many people are trying to use another method. Let me explain what I mean with an example and, even better, a comparison.
Some Case Studies
Let's run some numbers. For all of the doctors below, I'm going to use a below-average income. The average American physician made something like $376,000 in 2024, so we'll use $300,000 in 2026.
Our first doctor leaves residency in 2026 at age 30. By living like a resident for four years, this doctor saved 30% of their $300,000 income for retirement AND paid off their student loans within four years of finishing. They then started saving 30% of their income. This doc worked until 65 and, on average, earned 5% real on their investments. How much money do they retire with at age 65 (in 2026 dollars)?
=FV(5%,35,-30%*300000) = $8.1 million.
That's enough to provide a retirement income of something like $8.1 million x 4% = $325,000 a year, more than this doc ever earned. And that's not counting any other source of income like Social Security. Where did all that money come from? Well, 35 x $300,000 * 30% = $3.2 million of it came from brute force saving. They had lots of money in their retirement accounts because they put a lot of money into their retirement accounts. Millions of dollars over the years.
Our second doctor took a little more time to get into and through school and residency. They finished training at 35 and got that same $300,000 (in 2026 dollars) income. They spent the next five years paying off student loans but prioritized that over retirement savings. Then they wanted a big doctor house, so they saved up some money for a down payment, moved in, and renovated the house. By the time Doc No. 2 was 45, they were ready to start getting serious about saving for retirement. They had read somewhere that 15% was a great retirement savings goal, so they saved 15% of their income for retirement. Five years later, they felt a little burned out, heard about Coast FIRE, and decided to work and save hard for another five years before cutting way back on work, just earning enough to live on until the doctor retired at 65. How much money do they have to retire on at age 65?
At age 45, they have nothing.
At age 55, they have =FV(5%,10,-15%*300000) = $566,000.
At age 65, they have =FV(5%,10,0,-566000) = $922,000.
That $922,000 will provide a retirement income of $37,000 (in 2026 dollars). There's probably another $50,000 in Social Security income there, and they can have a dignified and comfortable, but not particularly extravagant, retirement.
Why does Doc No. 2 only have $922,000 when Doc No. 1 has $8.1 million? It's because the second doc put less into their retirement accounts. Considering they put in 10 x $300,000 x 15% = $450,000, that's about 1/7 as much as the first doctor. The second doc put in A LOT less.
Now, I'm not telling you that you have to work for 35 years. I'm not telling you that you have to save 30% of your income for retirement. I'm not telling you that you can't have a very nice retirement with less than $8 million. I'm certainly not telling you that you have to live like a resident your entire career or feel impoverished or never buy a brand new car or never go on a fancy European vacation. What I am telling you is that if you want to have a lot of money for retirement, you have to save a lot of money for retirement. And do it early if you can, so compound interest has more time to work on it.
Even a moderate path between these two folks would have a much better outcome than the second doc. Let's consider a third doctor.
This doctor comes out of training later at age 32, earns $300,000 in 2026 dollars, and pays off their student loans over five years. But this doctor also saves 10% for those five years by living kind of like a resident and then 20% after that until age 60. Then, they cut back (Coast FIRE) and saved nothing until they retired at age 65. What does Doc No. 3 have at age 65?
At 32, they have nothing.
At 37, they have =FV(5%,5,-10%*300000) = $166,000.
At age 45, they have =FV(5%,8,-20%*300000,-166000) = $818,000.
At age 55, they have =FV(5%,18,-20%*300000,-166000) = $2.1 million.
At age 60, when they stop saving, they have $3.0 million.
At age 65, when they retire, they have =FV(5%,5,0,-3000000) = $3.8 million.
That will support spending of about $3.8 million x 4% = $153,000 (in 2026 dollars) per year. Add on $50,000 a year of Social Security, and their spending should be at least as much as they have spent during their career after taxes and retirement savings. That should provide a pretty fun retirement without any real money worries.
How did Doc No. 3 do that? How did they end up with so much more than the second doc?
Oh. They put more in their retirement accounts? How much more?
They put in 10% * $300,000 x 5 + 20% * 300,000 x 23 = $1.5 million. That's three times as much as Doc No. 2. No surprise that they get to spend more than twice as much in retirement, is there?
More information here:
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It's Just Math
You don't get a pass on math. There is no reliable shortcut. Yes, maybe you can earn more by working harder or taking on a side gig and saving that. Yes, maybe you can earn higher returns by taking on more market risk, taking on more leverage risk, or personally adding value to your investments through even more work. Yes, you can be intelligent by how you spend (travel hacking?) and how you invest (Mega Backdoor Roths, cash balance plans, index funds, and carefully managed real estate?). Yes, you can pay less in taxes through careful strategizing.
But none of that REALLY moves the needle compared to just stuffing more money into those accounts, especially early on. Go ahead. Run the numbers. I think that after five minutes playing around with a financial calculator or a spreadsheet, you'll come to the same conclusion I have. The secret is there is no secret.
Boring?
Yup.
Effective?
Very.
I have yet to meet someone for whom it didn't work. Go ahead, find me a doctor who saved 20%+ of their income for 25+ years and invested it in any sort of reasonable way who feels strapped in retirement. I'll wait.
No one?
Yeah, that person doesn't exist. There aren't any guarantees in life, but this is awfully close to being one.
More information here:
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Here’s How Much We Make, Save, and Spend as ‘Moderate Earners’
Why Don't People Want to Put More Money in Their Retirement Accounts?
Despite the ease of the path, it is still chosen only rarely. There are all kinds of reasons why people don't do this. Let's list a few:
- They feel entitled due to sacrificing their 20s and maybe even a big chunk of their 30s.
- Their spouse wants to spend more money.
- They want to spend more money.
- Gucci.
- Tesla.
- They have family in their high-tax, high-cost-of-living state.
- They love their patients so much that they don't want to run an efficient practice or negotiate for appropriate pay.
- Nobody ever taught them how to invest in med school.
- They didn't know they could invest more than they could put in their retirement accounts.
- They're feeling burned out.
- The local schools are terrible, despite the fact that 95%+ of the kids in the area attend them.
- They want to eat healthy food or don't have time to prepare their own.
- They don't have time to drive on vacation, and you can't drive to Italy anyway.
- They'll save for retirement AFTER buying the house or taking care of the student loans.
- They got bad advice from an unscrupulous “financial advisor.”
Does any of that sound familiar? It does to me. I hear it all the time, even if it isn't phrased in exactly those ways.
This is “the cold, hard truth” about retirement.
This is “God's honest truth” about retirement.
If you want to get rich, stop spending all your money. Now. And start stuffing it into reasonable investments, preferably inside retirement accounts. And leave it there for a while.
What do you think? Why is saving money for retirement so hard for doctors? What have you done to encourage yourself to start saving early and often?